Gifts and Legacies

While many donors wish to give money to their favourite charities during their lifetime, others prefer to structure their giving through a legacy or legacies in their Will. There is a number of tax incentives designed to encourage people to give to charity in their Will.

Gifts to charity under a Will are completely exempt from Inheritance Tax, but the incentive to give is enhanced when the testator gives at least 10% of their estate to charity under their Will. If the 10% rule is met, the rate of Inheritance Tax paid on any taxable part of the deceased’s estate is reduced from 40% to 36%. This means that both charity and family can benefit.

It is critical that a Will is structured properly to ensure that the right beneficiaries (including charities) receive the amounts which a testator intends. It is also important to remember that some people may have claims against an estate (particularly spouses, civil partners and children) which can affect the amount which named charities would receive. All of this needs to be thought through carefully when structuring charitable giving in your Will.

Challenges to charity legacies under Wills are increasingly common and both charities and disappointed beneficiaries need to understand that such challenges are rarely straight-forward. Careful drafting of a Will can help to prevent challenges arising later. Our team of tax and succession lawyers are experienced in managing challenges and in drafting Wills which are designed to avoid such challenges in the first place.